Expert Yushkov: “Give up demands on Ukraine, and we will return Gazprom to Europe”

Elena Petrova, Tatyana Sviridova

The Swiss court in the canton of Zug has agreed to accept a settlement agreement between the operator of the Nord Stream 2 gas pipeline and its creditors. This means that the company will not go bankrupt. It would seem that the path for Russian gas to Europe is open again. World media outlets report on negotiations between the US and Russia on the sale of the pipeline and future supplies to the EU. However, experts believe that this is a simplified vision of the future. The West now has one goal - to seat Russia at the negotiating table with Ukraine and force it to compromise. No one is going to give guarantees that gas will flow to the EU again, says Igor Yushkov , leading analyst at the National Energy Security Fund and expert at the Financial University under the Government of the Russian Federation.

— A settlement agreement between creditors and Nord Stream 2 AG has been concluded. Does this mean that all problems with the gas pipeline have been resolved?

— The court approved the agreement between small creditors who filed for bankruptcy. Small companies, about 150 of them, which bought conditional paper or paper clips for Nord Stream AG2, provided services, including legal ones — registration and so on, Nord Stream AG2 also owed them money. The court constantly imposed a moratorium on bankruptcy so that the process would not be completed, so that the company would not go bankrupt. It is quite possible that Gazprom took on these payments.

For now, this is a bankruptcy deferment. Maybe the gas pipeline will not be launched, but for now, everyone has essentially paid for the wait, so that there would be an opportunity not to create additional problems. If there was bankruptcy, then Nord Stream AG2 would have to be sold at auction. Yes, Gazprom itself would most likely buy it, but all the same, these are procedures, paperwork, etc., etc. Why let it get to this point? They decided that it would be cheaper to settle all issues with small creditors.

— The major creditors are European energy companies, will they get back the billions they invested?

— Large creditors, namely Gazprom and five European companies that lent money to Gazprom to build this gas pipeline. Formally, some of them did not lend to Gazprom, but to Nord Stream AG2, a little less than a billion dollars each. In total, it costs about 10 billion dollars, and they lent about five. At one time, they wanted to buy shares, about 10% of shares in the gas pipeline, but then it turned out that they could not close the deal because the Polish antimonopoly service blocked it. It had to approve this deal, because when you want to buy a share in such a project, all antimonopoly services in the countries where you do business must approve this deal. All of Europe approved it, and the Poles, in order to disrupt this project, blocked it. The companies were unable to buy shares, but they took and lent Nord Stream AG2 the amount for which they were going to buy shares.

— There were reports that Uniper, Wintershall and others have already written off expenses. If they launch, will they ask for money again?

— They were supposed to get their money back by having Nord Stream AG2 launch the gas pipeline, Gazprom would pay its own subsidiary for pumping, and Nord Stream AG2 would pay the creditors from this money. Since the pipeline has not been launched, there is no money to pay off the loans. The foreigners have formally written off these debts in their accounting statements, although if Nord Stream AG2 has money, they will immediately demand that their expenses be reimbursed.

— The European Commission firmly believes that there will be no Russian gas in Europe, and is preparing a new package of sanctions. Then why are the US and Russia negotiating?

— The European Union has long insisted on removing Russian gas altogether. Again, this is a long-standing policy, they have always pressed and in this regard have come into conflict with national governments. The same Hungary and Slovakia will block any attempt to introduce sanctions banning the import of Russian gas, because they depend on it, it is the most profitable offer for them on the market. I think it will be difficult to introduce such sanctions.

Now they present this as a desire to bargain with the US: we will now remove Russian gas from the European market, thus clearing the sales market for you, and then you will reduce duties on European goods. There is no single position in Europe on the purchase of Russian gas and on Nord Stream 2. Everyone looks at this differently.

— Are Europeans, and Germans in particular, ready to pay for peace in Ukraine with their energy security?

— I think that in many ways the stories are different for them. They are not buying gas now. We need to consider the issue that they would agree to buy Russian gas when a peaceful settlement occurs. In this regard, a ceasefire and a settlement of the conflict would be beneficial for them so that this would be the basis for thinking about returning Russian gas to the European market. Of course, this would be beneficial for national governments. Russian gas would saturate the European market, prices would go down, and this would be beneficial for all of Europe.

But for now we see that political considerations are much more present than economic ones. Economic interests are relegated to the background, so it is not a fact that it will be possible to return Russian gas to the European market. In order to discuss anything, political changes must occur.

— How interested is Gazprom in the European market?

— Of course, it is. It was the largest sales market for them, a marginal market. They made good profits there. If we look at the near abroad now, the gas that comes from the West Siberian fields, where supplies to Europe were supplied from, where does it go, besides the Russian market? It goes to Belarus, to Turkey. Prices are still relatively high in Turkey. But Armenia, Central Asia, Uzbekistan, Kyrgyzstan — prices there are significantly lower than in Europe, around $160 per thousand cubic meters . Less than $200 per thousand cubic meters. Belarus is a special story, it is now $129 per thousand cubic meters there.

— And in Europe the price remains at around $400?

— Yes. 400 plus or minus. Sometimes more, sometimes less. Now is the off-season, when gas is no longer needed for heating, and not yet for cooling. All the same, 400 dollars is expensive. Of course, this was a marginal sales market for Gazprom. And it was profitable for the Russian Federation, because when gas was sold there, Gazprom paid the mineral extraction tax when it extracted gas and an export duty when it exported it to Europe, 30% of the market value is the export duty. Of course, this was profitable for both Gazprom and the state.

When we supply to the EAEU, there is no export duty. To Belarus, to Kazakhstan (we almost never supply there now), to Armenia, even though political relations have worsened, we still do not charge an export duty. For the budget, this is much less income than if Gazprom sold gas outside the EAEU, so it would be economically advantageous to return to the European market.

— Why don’t you believe in the West’s sincere position to restart Russian gas supplies to Europe?

— They want to plant this idea on us. We see that many Western media outlets are publishing this story that, supposedly, the Russian Federation and the United States are negotiating the return of Russian gas to Europe. But I think that this is an attempt to lure us and negotiate compromise solutions with Russia on the Ukrainian issue. You will give up some demands on Ukraine, and we will facilitate your return to the European market. But, naturally, no one will give us any guarantees in this regard. That is why such proposals are coming in.

I think this is not a question of a real return, but an attempt to lure into such an exchange. The Americans, if we come to an agreement with them, will then say: well, sorry, the Europeans do not want your gas back on their market. And fundamentally, this is not in the interests of the United States. On the contrary, they need Russian gas to finally leave the European market, then the sales market will be cleared for them. Therefore, I very much doubt that in reality it will be so easy to return to the European market.

— What is the point of the Americans buying SP-2 if Germany has not licensed it and is not going to allow its commissioning?

— Yes, today it is not working primarily because Germany has not issued a permit for commissioning. Again, when they say that the Americans will lift sanctions on it, but this is not enough to launch it. Permission needs to be issued by Germany. And even then, only one thread has survived.

For now, Germany is on the other side of the barricades. The Americans even talk to us more positively and it seems that we can agree on something. Europe is taking a much more radical position than before. Germany is no exception. Therefore, even those projects that are beneficial to Germany, they have already stopped or are ready to stop. For now, Europe is going to aggravate relations with Russia.